Profits repatriation from foreign companies operating in Pakistan has witnessed a seven-fold surge, reaching $485.4 million in the first four months of the current fiscal year.
This significant increase is attributed to the government’s efforts in clearing a backlog of payments that had been delayed due to a balance of payments crisis.
Data from the State Bank of Pakistan reveals that in October alone, multinational corporations (MNCs) and foreign investors in the stock market repatriated profits and dividends totaling $272.5 million, as reported by The News. The preceding month recorded repatriation amounting to $163.7 million.
Notably, in the July-October period of FY2024, profit repatriation on foreign direct investment increased sharply to $456.2 million, reflecting a substantial 680 percent increase compared to the same period the previous year.
Profits and dividends from portfolio investments during the first four months of the current fiscal year totaled $29.2 million, a decrease from $71.3 million in the corresponding period last year.
Analysts attribute the surge in repatriated incomes to the clearance of MNCs’ backlog of profits and dividends after the State Bank of Pakistan allowed these businesses to transfer foreign cash to their overseas headquarters.
The government’s measures to address the balance of payments crisis included import restrictions and a halt to sending dollars outside the country to curb capital flight and strengthen the currency.
With a $3 billion International Monetary Fund bailout package approved in July, the government lifted the import ban and allowed banks to settle importers’ letters of credit and repatriate earnings generated by foreign businesses.
Additionally, measures were implemented to stabilize the exchange rate, including crackdowns on currency and other smugglers.
The surge in demand for dollars in the currency market, driven by overseas companies purchasing dollars to pay dividends to investors abroad, has contributed to downward pressure on the rupee.
Furthermore, leading multinational corporations with operations in Pakistan were able to transfer more funds back to their headquarters due to increased corporate earnings.
According to Topline Securities data, KSE index businesses posted their highest quarterly earnings ever in the first quarter of FY2024, amounting to Rs417 billion, reflecting a 52 percent increase over the same period the previous year.
The food industry reported the largest profit outflows, followed by the transportation and petroleum refining sectors. In July-October FY2024, the food sector repatriated $68.4 million, while the international transport businesses remitted $67.2 million, and petroleum refining companies transferred $55.5 million. These figures mark significant increases compared to the same period last year.